Stacking the Decks

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The biggest American steelmaker would have the worldand the Bush administration, which is trying to save the company with fresh tariffs on products of foreign rivalsbelieve it is one of the most efficient producers around. Is it?

Stacking the Decks

The problem: It may be a fleeting advantage. According to Richard Fruehan, a professor of metallurgy at Carnegie Mellon University, it's next to impossible to establish a strategic advantage in the steel business with either information technology or sophisticated mill equipment. "Everybody has access to the same technology," he says. A company only needs to spend capital to bring systems in line with competitors.

Trudell and his team, though, have tried to go a step further. Into the machinery in its factories and computers on the desks of office workers, it has threaded sophisticated systems for order processing and fulfillment, inventory tracking and logistics, and customer services. These systems have boosted plant productivity, increased office efficiencies and enabled U.S. Steel to launch Straightline.

For instance, many of Ford's problems with U.S. Steel turned out to be faulty application of information technology. Systems were not in place to keep track of steel as it changed from raw materials to finished products; and they certainly were not in place to communicate just where along the manufacturing and delivery process an order for a particular customer happened to be. The quality of finished products even turned out to be dependent on information: customers would specify exactly what products they wanted, but specifications of their orders didn't get to the factory floor intact.

"In making steel, you're always changing your grade and finding faster and better ways to make steel," says Jeff Davies, U.S. Steel's director of plant information technology services. "But, for the most part, I think it was a matter of communicating more directly and completely with the automotive customers.''

Take the matter of advanced shipping notices (ASNs), a memo that lets a customer know what steel is going to be delivered at what time. In order to provide notice to Ford, U.S. Steel needed to collect status information in a timely manner from its processorsindependent companies that work steel coils into finished products.

U.S. Steel employs more than 120 outside processors, about 35 to 40 of which work on Ford products. Each processor used its own tracking systems, its own inventory codes, and its own tools for generating electronic ordering forms. Such electronic forms would be sent to U.S. Steel over a dialup system, known as an Electronic Document Interchange network. To take the data from a single processor, convert it to usable form and send it on to Ford would take U.S. Steel about 90 minutesfor a single message.

That made it hard to satisfy Ford. The carmaker wanted ASNs to arrive before truckloads of steel showed up at its door.

U.S. Steel was sending advance notices, in batches, on an hourly basis. However, many of these processing plants were strategically located near Ford sitessometimes just a 20-minute drive awaywhich meant that even if there wasn't a problem with data collection, aggregation, or transmission, the truck could still show up before the ASN.

That made Ford inefficient. If a truckload of steel shows up without an ASN, Ford employees have to manually collect details about the delivery and enter that data into Ford's systems. That canceled the benefit of technology. Inputting data is labor intensive and introduces human error.

U.S. Steel knew it needed to make a lot of improvements, and quickly. "We put on a full-court press," Trudell says.

The company wrote a new program to track inventory as it moved through the outside processors. The new system is "event driven," meaning that the receipt of an incoming message from a processor automatically triggers the next step in the chainan update of the inventory system, the formatting of a shipping notice, or the sending of an ASN.

U.S. Steel also incorporated electronic document formats standardized by the American Iron and Steel Institute, a steel industry trade group, and brought in a Sterling Commerce tool called Gentran to help translate messages.

The upgrade was done, but U.S. Steel wasn't finished. U.S. Steel started to compile statistics on data errors sent by its outside processors. And, for those processors that failed to show improvements, U.S. Steel would set up training sessions with the processors' staff.

Now, messages take 12 minutes of handling each, more than an 85% improvement.

That gave U.S. Steel a better sense of what was happening with suppliesand a solid network for communicating with processors. That led to Straightline.

"The process we developed to track these messages became the heart and soul of Straightline," Trudell says.

Straightline is an attempt by U.S. Steel to earn a profit selling steel to smaller buyers. Large steel buyers, such as Ford, purchase directly from a big manufacturer such as U.S. Steel. But lower-volume customerslike a file cabinet maker or air conditioner manufacturerlook to distributors to take their orders and deliver products.

With Straightline, buyers place orders over the Web or phone. Straightline manages customer inventories, provides up-to-the minute order status, and handles shipping from the mill, to the processor, and on to the customers.

Contributing EditorMel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.